1 Exhibit 99.1
AETNA AND U.S. HEALTHCARE AGREE TO MERGE
___________________________________
$8.9 Billion Transaction Will Create
Nation's Leading Health Care Benefits Company
________________________________
HARTFORD, CT. AND BLUE BELL, PA., APRIL 1, 1996 -- Aetna (NYSE:
AET) and U.S. Healthcare (NASDAQ:USHC), two of the nation's
leading health care companies, today announced that they have
agreed to merge in a transaction valued at $8.9 billion. The
combined enterprise will have a unique ability to provide high
quality health care services at a reasonable cost on a national
scale, meeting the needs of consumers and employers large and
small, and generating significant growth opportunities.
Together, the two companies provide health care services to 23
million people, or one in every 12 Americans, and will be the
leading provider of managed health care services with 10.3 million
managed care members. The combined company will offer a full
spectrum of products, including behavioral health, vision care,
dental, APM (pharmacy), and group life and disability insurance.
The merger agreement, which has been approved by the board of
directors of each company, calls for the formation of a new
holding company, Aetna Inc., domiciled in Connecticut. U.S.
Healthcare shareholders will receive $34.20 in cash, 0.2246 shares
of Aetna Inc. common stock, and 0.0749 shares of Aetna Inc.
mandatorily convertible preferred stock for each share of U.S.
Healthcare. At the March 29 closing price of $75.50 for Aetna,
that represents a value of approximately $57 for each U.S.
Healthcare share, a 24 percent premium over Friday's U.S.
Healthcare closing price of $45.88. Each share of Aetna stock
will become a share of Aetna Inc. stock. The combined company
will be 78 percent owned by Aetna shareholders and 22 percent
owned by U.S. Healthcare shareholders.
The merger will be financed with a combination of $5.3 billion in
cash, the issuance of $2.7 billion of new Aetna Inc. common stock,
and $0.9 billion in preferred securities.
The Aetna and U.S. Healthcare health businesses will be in wholly
owned subsidiaries of Aetna Inc., with each subsidiary maintaining
its current name. Aetna Chairman Ronald E. Compton will be
chairman and CEO of the new company. U.S. Healthcare Chairman
Leonard Abramson will join Aetna's board of directors and will
serve as a strategic consultant to Compton. Two additional
directors nominated by Abramson also will be named to the Aetna
Inc. board.
Exhibit 99.1
(continued)
2
The agreement is subject to approval by the shareholders of both
companies and federal and state regulators, the close of the
previously announced sale of Aetna's property/casualty unit to
Travelers Group, and other customary conditions. It is expected
to close in the third quarter of 1996. Abramson, who is the
controlling shareholder of U.S. Healthcare, has agreed to vote in
favor of the merger.
Compton said, "This merger is a major step in our strategic
plan to create an outstanding national health care company
which meets customers' needs for high quality health care
services at a reasonable cost. It is an excellent strategic
fit, and establishes a strong platform for growth, product
innovation, superior financial performance and excellent
long-term value for shareholders.
"Aetna is already one of the leading national health care
companies, with a strong national brand name and a wide
variety of health care products, serving a large number of
Fortune 1000 companies. U.S. Healthcare is widely
recognized as the best-managed HMO company, with high
customer satisfaction and acknowledged strengths in medical
quality and cost management, retail marketing and
information systems. Combining these strengths, the new
enterprise will be positioned to grow rapidly by offering
customers a wide variety of products and services on a
national scale," Compton said.
Abramson said, "As a leading provider of premier quality
health care services, U.S. Healthcare has achieved an
enviable level of customer satisfaction. We are
successfully expanding our membership in key geographic
markets. By merging our premier managed care capabilities
with Aetna's ability to manage large, multi-site plan
sponsors with complex servicing needs, we can create this
country's leading national health care company.
"Our focus will continue to be on the health of our members.
We intend to set the standard against which all health care
companies will be measured in terms of quality of health
care delivered, the choice of health care plans and
providers, and service to members. We will maintain our
leadership position in providing customers with the health
information and health care services they need to live
healthier and more fulfilling lives," Abramson said.
The new company expects to realize from synergies an
additional $300 million after taxes from the combined health
businesses within 18 months, including enhanced revenues
through additional HMO membership and cross-selling
opportunities with specialty health and group life, plus
reductions in medical and operating expenses.
"We expect to be able to deliver substantial growth in
earnings beyond 1997 when the effects of the synergies kick
in," Compton said.
Exhibit 99.1
(continued)
3
Consistent with its enhanced focus on growth, Aetna's board
of directors intends to change the dividend policy to
maintain a payout of 10 to 20 percent of operating earnings
before goodwill amortization, upon completion of the
transaction.
When the merger is complete, the combined health operations
will be managed as one organization, with a management team
drawn from both companies. Michael J. Cardillo and Joseph T.
Sebastianelli, currently co-presidents of U.S. Healthcare,
will be co-presidents of the combined health business,
reporting to Compton. They will maintain offices in both
Blue Bell, PA and Middletown, CT.
James Dickerson, currently chief financial officer of U.S.
Healthcare, will become chief financial officer of the
combined health business, reporting to the co-presidents.
Other key management appointments for the combined health
care business include:
From Aetna: Frolly M. Boyd, group life; A. Bruce Campbell,
Healthways; Allen P. Maltz, Chief Actuary; Thomas J.
McInerney, national accounts; Daniel S. Messina, deputy CFO;
Scott A. Striegel, operations; John W. Trustman, information
technology, and Thomas R. Williams, specialty health.
From U.S. Healthcare: Arthur N. Leibowitz, M.D., chief
medical officer; Timothy E. Nolan, sales; David F. Simon,
general counsel, and Richard A. Wolfson, pharmacy.
"The combined health business will be led by the strongest
management team in the industry today, representing the best
of both organizations and possessing the skills and
experience to successfully drive our business into the
future," Compton said.
James W. McLane, CEO of Aetna Health Plans, announced that
he plans to leave the Company soon, but will work with the
integration team to help ensure a smooth transition,
reporting to Compton.
Compton said, "I'm grateful to Jamie McLane for his efforts
over the last five years in building AHP into one of the
country's leading health care companies, with the
significant position it enjoys today. He is a strong
proponent of the decision to merge our health business with
U.S. Healthcare, and he will be instrumental in helping to
achieve a rapid and effective integration process."
A team consisting of Cardillo, Aetna Vice Chairman Richard
L. Huber, McInerney and Sebastianelli will plan for
integration of the two companies' systems and workforces
upon close of the transaction. The combined company will
remain committed to its two home regions, Connecticut and
Pennsylvania. Both regions will play an important role in
the company's future.
Exhibit 99.1
(continued)
4
"As we merge these two businesses, the integration team will
work to streamline operations," Compton said. "We will be
sensitive to the interests of our employees and the
communities where we live and work. We will rely as much as
possible on attrition, but some positions may be eliminated.
We will give qualified employees preference for new jobs
that are created as our business grows."
Combined Aetna/U.S. Healthcare health membership is 14.1
million members comprised of 10.3 million managed care
members and 3.8 million indemnity members.
Aetna is one of the country's largest insurance and
financial services organizations, centered around three core
businesses: Aetna Health Plans, Aetna Retirement Services
and Aetna International. Aetna Health Plans is the
country's third-largest health care company, reaching more
than 20 million Americans. Aetna Retirement Services
markets a variety of retirement, investment and life
insurance products to individuals, businesses and not-for-
profit institutions, serving 1.5 million customers directly
and through nearly 20,000 plan sponsors. Aetna
International offers a variety of life insurance and
financial services products and has more than 8.5 million
customers in 10 countries.
U.S. Healthcare provides managed health care services
through its HMOs in Pennsylvania, New Jersey, New York,
Delaware, Connecticut, Massachusetts, New Hampshire,
Maryland, Georgia, Virginia, Rhode Island, the District of
Columbia, North Carolina and South Carolina. The Company
also provides a variety of other managed health care
services to self-insured and other employers, including
workers compensation managed care, coordination and
administration of multiple health plans for multi-state
employers and quality measurement and improvement programs
and data analysis systems for providers and purchasers of
health care.
###
Shareholders of Aetna and U.S. Healthcare will be asked to
approve the merger agreement and exchange of shares pursuant
to a proxy statement/prospectus forming part of a
registration statement to be filed with the Securities and
Exchange Commission (the "SEC"). This press release does
not constitute an offer or solicitation of an offer for
securities or the solicitation of any approval by
shareholders of U.S. Healthcare or Aetna. For additional
information regarding factors that may materially affect the
acquisition, including estimated earnings, cost savings and
improvements and revenue enhancements, please see Aetna's
Form 8-K filed with the SEC today.
Additional information about the companies is available on
the following Internet addresses: www.aetna.com and
www.ushc.com